CNN Fear and Greed index consistent with other risk aversion and stress indices

Focusing on stress and market sentiment indices before the election has been useful for providing evidence that is contrary to many talking heads. The reading of the CNN Fear and Greed Index which is a variation on the stress indices we follow shows levels that at 50 right in the middle of the range. There is a balance between greed and fear measures.

The CNN index consists of seven indicators that are more associated with the stock market. The seven include: 

• the junk-investment grade spread, which is tight and indicating greed;
• market momentum as measured by deviations from the 125-day moving average, the market is high above the 125-day average which suggests greed;
• the put/call ratio, which is showing low values and also suggesting greed; 
• the VIX volatility index versus the 50-day moving average, which is showing a neutral indication; 
• the safe haven measure of 20-day stock/bond relative return, which is low and showing fear.
• the stock price breath as measured by the McClellan volume summation index, which is indicating fear given its low level;
• the stock market strength as measured by the 52-week net new high, which is at the lower end of the recent range and also suggests fear.  

There is a balance between greed and fear versus what existed last month. The market does not suggest negative sentiment or significant stress. We have looked this week at the CSFB Fear index and the OFR Financial Stress Index and have gotten similar readings. See: CSFB Fear Barometer - Why is fear stable? and No stress in the markets, but it has a way of sneaking up on investors.